Corporate Social Responsibility

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Corporate Social Responsibility

Nathalie CRUTZENHEC-Management School of the University of Liege

(Belgium)

[email protected]

Environment

Planet

Economic

ProfitsSocial

People

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"Sustainability has been our salvation"

Ray Anderson, CEO of Interface flooring

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"Sustainability represents the greatest opportunity for the

next generation"

Lee Scott, Former President and CEO of Walmart

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Today's agenda Student introductions Online assignment

Symbols of CSR / sustainability Readings: The Economist, Matten and Crane

Context The case for and against CSR Fundamental theories and concepts Company examples

KLM Starbucks Wal-Mart …

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Your name,Where you're from

andSomething which characterizes you…

which makes you distinctive

You!

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Pre-module assignment Symbols of CSR / sustainability

(Session 1)

Video / Film Clip on CSR / Sustainability (Session 4)

CSR heroes (Session 9)

NGO and NPO heroes (Session 3)

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Sustainability report presentations

Begin on Friday 15 June. All presentations take place in the second half of class , after the break (10:45)

Friday 15 June – Siemens advocates and critics Monday 18 June – Danone advocates and critics Tuesday 19 June – GSK advocates and critics Wednesday 20 June - Toyota advocates and critics

Format Powerpoint, in English Length of presentation: 20 mn. followed by 10 mn. Q/A session In general, 20-25 slides

Each person in group should have a role in preparing and presenting. Resources on Wiki

Links to sustainability report Points for advocates to cover Grading criteria / evaluation sheet Good student examples from spring CSR module taught at ESC Rennes

Make it interesting - feel free to be creative! Break up into groups for 15 mn. to introduce yourselves and

schedule your preparation time.

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Introductory video

http://www.youtube.com/watch?v=GggyVO21hw8&feature=watch_response

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Context Worldwide scandals and disasters (Ex. EnRON, B. Madoff; Exxon Valdez, BP oil spills; Nike, Gap)http://www.youtube.com/watch?v=MbjC9SMKClEhttp://www.youtube.com/watch?v=pkEYtsUkFRY Increasing transparency (Internet, NGOs) “Firms are

being WATCHED” The Financial Crisis (September 2008) and the related

worldwide economic crisis

!! Increasing awareness for global environmental and social challenges

Pollution, water withdrawal, biodiversity, climate change, Poverty, health, fight for talents, etc.

http://www.youtube.com/watch?v=a9I3Q6-ZSTI&feature=related

http://www.youtube.com/watch?v=YsMw4TQ6DY4

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Major Environmental Issues Climate change Energy Water Biodiversity and land use Chemicals, toxics, heavy metals, nuclear waste Air pollution Waste management Ozone depletion Oceans and fisheries Deforestation

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Climate change A primer by National Geographic

http://www.youtube.com/watch?v=-MY-i_kdwe0

Consequences Hotter temperatures –

2003 Europe (what about 2011/2012?) – 26,000 deaths Rising sea levels Disrupted eco systems Increased ocean temperatures and intensity of

windstorms Environmental refugees

Biodiversity Biodiversity is the degree of variation of life forms

within a given ecosystem, biome or an entire planet

Biodiversity is a measure of the health of ecosystems. Greater biodiversity implies greater health

http://www.youtube.com/watch?v=V1VYmpTikgw

European Network for Biodiversityhttp://www.enbi.info/forums/enbi/index.php Global Issueshttp://www.globalissues.org/issue/169/biodiversity

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Social Issues Aging of the population Health Poverty Racism Well-being Stress Local development Etc.

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Sustainable Development

http://www.youtube.com/wat http://www.youtube.com/watch?v=FS7o4g5kzMM&feature=related

ch?v=B5NiTN0chj0&feature=related

Context Sustainable Development

• If one wants to favour a sustainable development of the Society/World, need to consider three complementary and interdependent pillars :

– Economic dimension - creation of wealth for all thanks to a sustainable production and consumption

– Environmental dimension – preservation and adequate management of natural resources

– Social dimension – equity and involvement of all social groups

• Separately, each dimension does not contribute to an optimal development of the World.

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Environment

Planet

Economic

Profits

Social

People

Sustainable DevelopmentTaxes paidROI, salesJob creation

Social: DiversityLabor practicesSocietal: Human rights, unemployment

Air & water qualityEnergy usageWaste treatment

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What is CSR?

Responsible management?

Corporate Social Responsibility (CSR)

• !! False friend !! – Corporate?– Social?

• Many definitions – not a generally-accepted one ! • Contribution of (individual) firms to the

Sustainable Development of the Society

• “(Voluntary) integration, by firms, of social and environmental concerns in their business operations and in their interaction with their stakeholders" (European Commission, 2003)

Sustainable and Responsible Businesses 18

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What is CSR? Corporate social responsibility (CSR) is about how

businesses align their values and behavior with the expectations and needs of stakeholders - customers and investors, but also employees, suppliers, communities, regulators, special interest groups and society as a whole (the public sphere).

CSR demands that businesses manage the

economic, social and environmental impacts of their operations to maximize the benefits and minimize the downsides.

CSR "ESR" Environmental and Social Responsibility"Source: http://www.csrnetwork.com/csr.asp

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Corporate Sustainability is a business approach

that creates long-term shareholder value by

embracing opportunities and managing risks deriving from

economic, environmental and social developments.

Dow Jones Sustainability Index site

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Corporate sustainability leaders, [responsible managers]

achieve long-term shareholder value by gearing their strategies and management

to harness the market's potential for sustainability products and services

while at the same time successfully reducing and avoiding sustainability costs and risks.

Dow Jones Sustainability Index site

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What does CSR mean for these companies?

http://www.youtube.com/watch?v=P_zgtlW2TWY&lr=1

http://www.youtube.com/watch?v=Is_HRAttonE&feature=related

http://www.youtube.com/watch?v=Nly_OdvORQY

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Core/central characteristics of CSR (Crane et al., 2008)

Voluntary (beyond the law) Managing “externalities” (side effects of economic

behavior that are borne by others but, traditionally, that are not taken into account in a firm’s decision making process and not included in the market price for goods and services)

Multiple stakeholder orientation Alignment of social and economic

responsibilities Practices and values Beyond philanthropy (beyond largesse towards the

less fortunate)

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Historical development of CSR

Early 20th century Europe Tendency to address social issues through governmental

policies and collective actions Paternalism of big business: housing, education,

healthcare provided France: Michelin tires, Godin (ovens) England: Cadbury’s – Germany: Krupp

USA “CSR is essentially a US idea” (“limited role” of the

government) Particularity of the US system (fairly unregulated markets

for labor and capital, low levels of welfare state provision, etc.) many social issues have traditionally been at the core of CSR.

Philanthropy (10X higher than in UK) (limited role of the government + tax incentives): from Carnegie and Rockefeller to Warren Buffet and Bill/Melinda Gates foundation

http://www.gatesfoundation.org/Pages/home.aspx http://www.youtube.com/watch?v=7b51coOxZKo&list=PL7BD4E280453ECD7D&index=3&feature=plpp_video http://www.youtube.com/watch?v=oyBVIcV6e5k

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Forces for change Civil Rights Movement (1950s and 60s, USA)

NGO activism (Greenpeace’s and Amnesty International’s boycotting campaigns)

Regulations resulting from industrial catastrophes (Bhopal, Exxon Valdez)

Growing awareness of ecological issues: global warming, biodiversity. Rejection of materialism in late 1960s.

Historical divides enhanced by globalization and financial crises: North/South, social, rural/urban precariousness, social exclusion 25

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CSR boom starting in 1990s Sustainable Development (SD) and CSR are became integrated

by a growing number of companies of all sizes in different industries and in different countries

Fashionable phenomenon profound movement Paul Hawken's Wiser Earth movement 130,000 organizations working toward social and environmental

justice.

The most advanced companies have put in place specific strategies, structures, action plans, and reporting tools

These participate in specialized networks to exchange good practices throughout their supply chains ripple effect in the entire industry.Ex. Cefic (European Chemical Industry Council)

http://www.cefic.org/sustainability/Cefic-Sustainability-Report-2011-2012/26

Why bother with CSR? To do what others do? To save the planet? To feel less guilty? To do “something”? To improve the company's reputation?

Several motivations : Market reasons Competitive reasons Legal reasons Marketing reasons Real values 27

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Not everyone agrees…

"Business only social responsibility is to maximize profits, within the limits of the law. A company ’s major contribution to general welfare is the efficient production of goods and services. Social action should be left up to concerned individuals and government agencies."

"CSR is a fundamentally subversive doctrine". Milton Friedman, American Nobel Economist, 1973

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Friedman's arguments against CSR

The purpose of a business: maximize profits within the limits of the law

Only human beings – not corporations - have moral responsibility for their actions.

The manager is an agent serving the interests of his principal, those who own the corporation, and should Act solely in the interest of the shareholder Not spend shareholders' money at her/his discretion

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Countering Friedman's arguments

At the time Friedman voiced opposition to CSR, his arguments could and did not take into account phenomena which occurred after the 1970s:

Globalization: the power and mobility of MNCs (+ scandals)

Increasing transparency (Internet) – firms are being watched !

Governmental failure in the west, the collapse of communist block.

High unemployment

Environmental risks which know no borders have social, political and economic effects.

His arguments rest on assumptions about The nature of the modern corporation The role and capacity of governments

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Moral imperative of social responsiveness – companies should anticipate and prevent social problems

Enlightened self-interest: "it pays to manage people right" Watson & Wyatt survey: link between HCI and share price Examples: Whole Foods, Southwest Airlines

Sound governance avoids government regulation. A firm's strategic decisions have economic, social, and political

consequences Renault's decision to outsource Clio production to Turkey Dow's decision to sell napalm to the U.S. Army in Vietnam Copper mining in Zambia

The Economist reading's case for CSR?

The case for CSRHenry Mintzberg, professor at McGill U., Montreal

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The “business” case for CSR

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4 classifications of CSR theories(Garriga and Melé in Crane et al., 2008)

Instrumental theories

Integrative theories

Political theories

Ethical theories

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1. Instrumental theories

Sees CSR as a strategic tool to create wealth Assumes positive “CSR financial performance”

correlation 3 approaches:

A. Maximize shareholder valueB. Strategies for achieving competitive advantageC. Cause-related marketing

Focus: Achievement of economic objectives through social or environmental means / activities

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Instrumental theoriesB. Strategies for achieving competitive advantage

Resources long-term objectives competitive advantage Example: Bottom of the (economic) pyramid or BOP

strategy Make profits by "serving" the poor class of 4 bn. consumers

through disruptive innovations - products / services produced at a lower cost, with fewer capabilities, adapted to target

These innovations can improve social and economic conditionshttp://www.youtube.com/watch?v=79JOHMrs8m4http://www.youtube.com/watch?v=CPnx6gLcfK4&feature=related Examples:

Dacia Logan (Renault) in Romania, now in France Tata India automobileshttp://www.youtube.com/watch?v=3WB87eo_obU Solar energy panels in African villages Vodafone and Safaricom: M-Pesa – Mobile Phone Payment solution

in Kenyahttp://www.youtube.com/watch?v=B6m3xb6T5kk Grameen Bank : micro-credit and mobile phone service in remote

areashttp://www.youtube.com/watch?v=TPk2gRuIdj0&feature=relmfu

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Instrumental theoriesC. Cause-related marketing

Altruistic activities used as a marketing instrument

Contribute to a designated cause in order to create a reputation for a firm as "reliable and honest" Increased customer loyalty and revenues

"Enlightened self-interest" - linking the company to a charitable cause win-win situation

One example: Avon's breast cancer foundation

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2. Political theories

A. Corporate constitutionalis

mB. Corporate citizenship

Focus: Responsible use of business power in the political arena

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2. Political theories Corporate citizenship

http://www.youtube.com/watch?v=7bsMpShiOp0 Definition: Companies acting responsibly (3 Ps), as citizens (ie.

members of a community), toward the global and local communities

Corporations enter the area of citizenship at the point of government failure – "welfare state" crises and globalization

Deregulation process, decreasing costs + technological improvements have meant that some MNCs have more economic and social power than some governments

They can act as citizens what are their rights, their responsibilities and the potential partnerships?

Example: Carrefour Brazil in 2008 collected 319 tons of clothing, water an food in response to torrential rains which left many people homeless

Forbes' rating of 100 top corporate citizens Criteria: environmental impact, climate change, human rights,

philanthropy, employee relations, financial performance and governance

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Corporations & Countries

Annual Sales (B$,2004)

GNP (B$)

210.1 188.6175.7 163.7 162.4

130.3 123.5

Wal -Mart

219.8 GM

177.3

BP

174.2Ford

162.4

DaimlerChrysler

136.9GE

125.9

Exxon

191.6

Sweden Austria Poland Norway Denmark Indonesia Venezuela

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3. Integrative theories

A. Stakeholder management: responding to and balancing the interests of stakeholders – any person or group which affects or is affected by the firm Tomorrow's topic (Session 2)!

B. Corporate social performance: Principles of CSR, Processes (stakeholder management, assessment, management) and Outcomes (social impacts)

Example: Caroll's pyramid of social responsibility

Focus: How business integrates social demands, as it depends on society for its existence, continuity and growth (legitimacy, prestige)

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4. Ethical theories / approach to CSR

Based on principles that express the "right thing" to do in order to achieve a "good society“

Anchored in moral philosophy theories

Normative – "what should be" – as opposed to descriptive – "what is"

Two approachesA. Universal rightsB. Common good approach

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4. Ethical theories B. Common good approach

The common good is the supreme good of the society. A concept traditionally confined to philosophy, theology, and economics, more than management

Business has to contribute to the common good, because it is part of society.

Business should neither be harmful to nor a parasite on society, but purely a positive contributor to the well-being of the society

General categories of common goods: Means of existence

Access to drinkable water Basic alimentation Energy Habitat Health

“Means” of co-existence between peoples Freedom of information Cultural diversity Civil and political rights

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Common goodMeans of existence issues

Environmental Climate change, protecting the biosphere Ozone layer depletion Pollution: air, water, noise Access to water Land use and pollution (chemicals, toxics, heavy metals, nuclear

wastes) Resource depletion

Oceans and fisheries Biodiversity Deforestation

Energy The end of oil Renewable energies: wind, solar, water, biomass,…

Social issues Poverty: the north-south divide Economic development in emerging countries Overpopulation Inequality – growing in western countries

"The Future We Want" - Improving the urban environment from "Force for Good"

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SummaryCSR is good business

Improves reputation, brand image, and trust Higher customer loyalty Attraction and retention of top talent and employees Benefit of doubt in crisis

Uncovers previously hidden commercial opportunities and potentially new markets

Reduces costs Reduces risks: decreases vulnerability to misconduct & fines Attracts investment capital

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References Crane, A. & Matten, D. (2008), Corporate Social

Responsibility: Readings and Cases in a Global Context. Routledge, 2008.

Esty, D. C. & Winston, A. S. (2009), Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, John Wylie & Sons

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Presentation of CSR Symbols

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Discussion – Articles

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“CSR is only relevant for large private sector companies” – Critically discuss and provide other

examples

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CSR in different organizational contexts

CSR and the private sector Large corporations SME’s “20% of SMEs reported on their CSR as opposed to 62% of large businesses”

(2003) CSR and the public sector

Government still supply a lot of goods and services – Public sector organizations face similar claims, expectations – even more pronounced

By definitions, “social aims” - run as “non-for-profit” organizations Particular impact on Society (eg. Quasi-monopolistic position)

Roles Incorporating CSR in their values, strategy and operations Promoting CSR within their sphere of influence

CSR and civil-society organizations

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CSR in different regions of the world

Is CSR similar in various parts of the world (developed, developing or emerging countries)?

Could you give some insights about CSR approaches/characteristics in your countries?

Context, evolution, examples

China, Colombia, Egypt, Finland, Germany, Greece, Lithuania, India, UK, US

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CSR in a global contextOne-size-fits-all approach cannot work: different contexts, differents priorities

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Session 2: Stakeholder Management

http://knowledge.wharton.upenn.edu/article.cfm?articleid=3009